Raising a migrant tax

New Zealand immigration is an important area of debate with lots of ideas and opinions – to ensure immigration continues to provide a benefit it must be carefully managed as there are definitely pros and cons.

This week I saw an article on NewsHub ‘Expert calls for poll tax on immigrants‘ that I wanted to discuss, mainly because this is an important debate and the ‘expert’ Mark Keating had not helped one bit by getting his numbers very badly wrong.

“A tax expert says there should be a poll tax on immigrants of up to $15,000 to help cover the cost of extra infrastructure and services needed by a growing population.”

A migrant tax
The idea of a migrant tax is not new – last year migrants paid $201 million in fees and $15.4 million in levies, this is used against the costs of the immigration department and other services.

In December 2015 levies were extended to cover all visa applications – previously only people getting residence paid a levy – meaning more cash: the $17 now applied to every student visa application alone should bring in an additional $1.7 million in income per year.

The article about Mr Keating quoted an estimated additional $100 billion would be needed over the next 10 years to cover costs of hospitals, schools, roads and services to cope with population growth. New Zealand’s population grew by 97,300 (2.1%) in the year to June 2016, Statistics New Zealand estimates 71% of that growth is as a result of immigration with 29% being a natural increase so this is an important discussion we need to have.

Mr Keating has calculated that on current immigration figures, a tax of $10,000 would raise more than $896 million a year, and at $15,000 it would raise more than $1.3 billion.

Who would pay the tax
Before we get into the numbers I wanted to know who would pay this poll tax, currently all applicants – whether for a 3 month visitor visa or residence pay a levy. Quotes attributed in the article to Mr Keating indicate this is aimed at people coming to live in New Zealand permanently – to ‘join our club’ and to ‘share in everything New Zealand has built up’. It would seem a little unfair to charge $10,000 to temporary students and workers right?

Each individual would pay the poll – a family of four would pay four amounts and so would partners and children of New Zealand citizens returning from abroad. Mr Keating is not applying this to Australian citizens (25,681 arrived in the year to Jan 2017), refugees or people filling skill shortages.

How much would each person pay?The target would be $7.1 billion (that 71% generating their share of $10 billion needed a year) and Mr Keating suggests each person should pay between $10,000 and $15,000 to raise between $896 million and $1.3 billion per year. A family of 4 would then pay between $40,000 and $60,000 on top of current levies and fees.

Currently migrants bring in between $2 billion and $3 billion a year net of costs but that gets spent into the economy rather than paid to the government.

$10,000 to $15,000 sounds a lot but unfortunately Mr Keating has got his numbers wrong. Had Mr Keating used correct figures from data set he appears to be applying instead of between $10,000 and $15,000 to raise the sums suggested individuals would need to pay between $53,632 and $80,435 each!

That New Zealander returning with a partner and three children would need to pay between $214,495 and $321,743 to get their family in to the ‘old country’.

Why are these calculations wrong?
I have to make an assumption here but I think it’s a reasonable one, bear with me. The article on NewsHub was quite light on details making it harder to check the calculation however an earlier article published by the University of Auckland gave more information.

In the year to January, there were 89,670 permanent and long-term arrivals to New Zealand, excluding refugees, Australians and returning New Zealanders. At $10,000 per arriving person, that would generate $896,700,000. At $15,000 per migrant, it would total $1.345 billion.

Unfortunately and unusually the figure of 89,670 migrants is not referenced but I think we can work out where it came from. The article specifically mentions figures to January 2017. There are two sources of immigration data: Statistics New Zealand and the immigration department. While Stats NZ provides monthly reports data from Immigration New Zealand tends to be annual to June.

Statistics NZ’s monthly report on ‘Permanent and Long Term Migration’ (PLT) to January 2017 confirms 89,670 people arrived who were not ‘NZ and Australian citizens’ or ‘other’. As this is quite a specific number I think we’ve found the source of these figures.

The problem with using this figure is that only 16,722 of this group confirmed they were staying NZ permanently, the other 72,948 were temporary visitors, workers and students:

Visa type

Number

Percentage

Residence

16,722

18.6

Student

24,297

27.1

Work

42,415

47.3

Visitor

6,236

7.0

Total

89,670

Applying this number gives the individual poll tax of between $53,632 and $80,435 to achieve the same income. To calculate a levy which would be applied to people being granted residence it might have been more useful to:

In the year to June 2016 for example Immigration New Zealand statistics confirm 52,052 people were granted residence (excluding Australian citizens). If you drop off the other people Mr Keating suggests – people filling skill shortages and refugees – the poll tax would fall on the remainder of roughly 38,000 made up of investors, entrepreneurs and partners and children (of New Zealand citizens, residents and workers filling skill shortages).

This is why it is important to consider who will actually be paying this amount – the returning New Zealander with a partner and three children might only need to pay as little as $102,388 to be allowed to bring them into the country.

We need a serious discussion but could it please be based on applicable evidence and facts! It’s a shame NewsHub and the University of Auckland didn’t check in to these claims before publishing them.